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241. The American Welfare State: How We Spend Nearly $1 Trillion a Year Fighting Poverty—And Fail

Author:
Michael Tanner
Publication Date:
04-2012
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
News that the poverty rate has risen to 15.1 percent of Americans, the highest level in nearly a decade, has set off a predictable round of calls for increased government spending on social welfare programs. Yet this year the federal government will spend more than $668 billion on at least 126 different programs to fight poverty. And that does not even begin to count welfare spending by state and local governments, which adds $284 billion to that figure. In total, the United States spends nearly $1 trillion every year to fight poverty. That amounts to $20,610 for every poor person in America, or $61,830 per poor family of three.
Topic:
Economics, Government, and Poverty
Political Geography:
United States and America

242. What Made the Financial Crisis Systemic?

Author:
Patric H. Hendershott and Kevin Villani
Publication Date:
03-2012
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
The current narrative regarding the 2008 systemic financial system collapse is that numerous seemingly unrelated events occurred in unregulated or underregulated markets, requiring widespread bailouts of actors across the financial spectrum, from mortgage borrowers to investors in money market funds. The Financial Crisis Inquiry Commission, created by the U.S. Congress to investigate the causes of the crisis, promotes this politically convenient narrative, and the 2010 Dodd-Frank Act operationalizes it by completing the progressive extension of federal protection and regulation of banking and finance that began in the 1930s so that it now covers virtually all financial activities, including hedge funds and proprietary trading. The Dodd-Frank Act further charges the newly created Financial Stability Oversight Council, made up of politicians, bureaucrats, and university professors, with preventing a subsequent systemic crisis.
Topic:
Economics, Government, Markets, Global Recession, and Financial Crisis
Political Geography:
United States

243. Libertarian Roots of the Tea Party

Author:
David Kirby and Emily McClintock Ekins
Publication Date:
08-2012
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
Many people on the left still dismiss the tea party as the same old religious right, but the evidence says they are wrong. The tea party has strong libertarian roots and is a functionally libertarian influence on the Republican Party.
Topic:
Democratization, Economics, Politics, Insurgency, and Financial Crisis
Political Geography:
United States

244. Regulation, Market Structure, and Role of the Credit Rating Agencies

Author:
Mark A. Calabria and Emily McClintock Ekins
Publication Date:
08-2012
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
During the financial crisis of 2008, the financial markets would have been better served if the credit rating agency industry had been more competitive. We present evidence that suggests the Securities and Exchange Commission's designation of Nationally Recognized Statistical Rating Organizations (NRSROs) inadvertently created a de facto oligopoly, which primarily propped up three firms: Moody's, S, and Fitch. We also explain the rationale behind the NRSRO designation given to credit rating agencies (CRAs) and demonstrate that it was not intended to be an oligopolistic mechanism or to reduce investor due diligence, but rather was intended to protect consumers. Although CRAs were indirectly constrained by their reputation among investors, the lack of competition allowed for greater market complacency. Government regulatory use of credit ratings inflated the market demand for NRSRO ratings, despite the decreasing informational value of credit ratings. It is unlikely that this sort of regulatory framework could result in anything except misaligned incentives among economic actors and distorted market information that provides inaccurate signals to investors and other financial actors. Given the importance of our capital infrastructure and the power of credit rating agencies in our financial markets, and despite the good intentions of the uses of the NRSRO designation, it is not worth the cost and should be abolished. Regulators should work to eliminate regulatory reliance on credit ratings for financial safety and soundness. These regulatory reforms will, in turn, reduce CRA oligopolistic power and the artificial demand for their ratings.
Topic:
Economics, Markets, Financial Crisis, and Governance
Political Geography:
United States

245. Corporate Welfare in the Federal Budget

Author:
Tad DeHaven
Publication Date:
07-2012
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
Rising federal spending and huge deficits are pushing the nation toward a financial and economic crisis. Policymakers should find and eliminate wasteful, damaging, and unneeded programs in the federal budget. One good way to save money would be to cut subsidies to businesses. Corporate welfare in the federal budget costs taxpayers almost $100 billion a year.
Topic:
Economics, Markets, Monetary Policy, and Financial Crisis
Political Geography:
United States

246. The Virtues of Free Markets

Author:
Mark A. Zupan
Publication Date:
06-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Free markets have many virtues. Arguably, the most recognized is the expansion of individual choice—and thus freedom—through mutually beneficial exchange (see Bauer's definition of economic development in Dorn 2002: 356). This proposition is at the heart of the enduring impact of Adam Smith's Wealth of Nations ([1776] 1937) which aptly spells out the benefits of the Invisible Hand for citizens and societies.
Topic:
Government

247. The Diversity of Debt Crises in Europe

Author:
Jerome L. Stein
Publication Date:
06-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The foreign debts of the European countries are at the core of the current crises. Generally, the crises are attributed to government budget deficits in excess of the values stated in the Stability and Growth Pact (SGP), as part of the Maastricht treaty. Proposals for reform generally involve increasing the powers of the European Union to monitor fiscal policies of the national governments and increasing bank regulation.
Political Geography:
Europe

248. Markets, Tort Law, and Regulation to Achieve Safety

Author:
Paul H. Rubin
Publication Date:
06-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Markets, tort law, and regulation are alternative methods of achieving safety. Of these, the market is the most powerful, but it is often ignored in policy discussions. I show that both for the United States over time and for the world as a whole, higher incomes are associated with lower accidental death rates, and I discuss some examples of markets creating safety. Markets may fail if there are third-party effects or if there are information problems. Classic tort law is a reasonable (although expensive) way to handle third-party effects for strangers, as in the case of auto accidents. In theory, regulation could solve information problems, but in practice many regulations overreach because of different information problems—consumers are unaware of unapproved alternatives. A particularly difficult information problem arises in the case of what I call “ambiguous goods”— goods that reduce some risks but increase others (for example, medical care and malpractice.) Product liability focuses on these goods; over half of the litigation groups of the American Association for Justice are for ambiguous goods.
Topic:
Markets
Political Geography:
United States

249. Economic Freedom and Happiness

Author:
Daniel M. Gropper, Robert A. Lawson, and Jere T. Thorne Jr.
Publication Date:
06-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
That liberty is necessary for greater happiness and a better life is a notion deeply rooted in the American sensibility. But is there a link between greater freedom and greater happiness across countries? In this article we explore this question by examining the empirical relationship between liberty, as measured by economic freedom, and happiness across more than 100 countries.
Political Geography:
America

250. The Impact of Ohio's EdChoice on Traditional Public School Performance

Author:
Matthew Carr
Publication Date:
06-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Over the course of the last 35 years, traditional public school student achievement in the United States has been stagnant, despite myriad reform efforts and a doubling in total expenditures on K–12 education (Ravitch 2000, Hanushek 1986, Greene 2005). The ramifications of this academic achievement plateau on human capital development and thus the country's global economic standing are of paramount importance (Heckman and Masterov 2007). Thus, one of the most important public policy questions that government and society faces is how to improve the academic performance and quality of the nation's public education system.
Topic:
Government
Political Geography:
United States